Post on 04-Jul-2020
6/6/2017
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2017 dbAccess Global Consumer Conference
Benno DorerChairman and Chief Executive Officer
June 14, 2017
Safe HarborExcept for historical information, matters discussed in this presentation, including statements about the success of the Company’s
future volume, sales, costs, cost savings, earnings, foreign currencies, and foreign currency exchange rates, cash flows, plans,
objectives, expectations, growth or profitability, are forward-looking statements based on management’s estimates, assumptions
and projections. Important factors that could affect performance and cause results to differ materially from management’s
expectations are described in the Company’s most recent Form 10-K filed with the SEC, as updated from time to time in the
Company's SEC filings. Those factors include, but are not limited to, risks related to competition in the Company’s markets;
economic conditions and financial market volatility; the Company’s ability to drive sales growth and increase market share;
international operations, including price controls, foreign currency fluctuations, labor claims and labor unrest, potential harm and
liabilities from use, storage and transportation of chlorine in certain markets and discontinuation of operations in Venezuela;
volatility and increases in commodity, energy and other costs; supply disruptions; dependence on key customers; government
regulations; political, legal and tax risks; information technology security breaches or cyber attacks; risks relating to acquisitions,
new ventures and divestitures; the success of the Company’s business strategies and products; product liability claims, labor claims
and other legal proceedings; the Company’s business reputation; environmental matters; the Company’s ability to assert and
defend its intellectual property rights; and the impacts of potential stockholder activism.
The Company may also use non-GAAP financial measures, which could differ from reported results using Generally Accepted
Accounting Principles (GAAP). The most directly comparable GAAP financial measures and reconciliation to non-GAAP financial
measures are set forth in the Appendix hereto, the Supplemental Schedules of the Company’s quarterly financial results and in the
Company’s SEC filings, including its Form 10-K and its exhibits furnished to the SEC, which are posted at
www.TheCloroxCompany.com in the Investors/Financial Information/Financial Results and SEC Filings sections, respectively.
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Key Messages
• We have confidence in our 2020 Strategy
• Focus on profitable growth continues to produce solid results
International : 17% Cleaning : 33%
Household : 33%Lifestyle : 17%
Cleaning 33%
Household 33%
Lifestyle 17%
International
17%
Advantaged PortfolioOver 80% of Sales in U.S. and from #1 or #2 Share Brands
Latin America 9%
Canada 3%
Australia / NZ 2%
Rest of World 3%
9%
4%
4%
15%
11%
6%
Home Care 18%
Laundry 9%
Professional 6%
FY16 Company Sales: $5.8B
<1%*
*Note: Reflects results following May 2016 Acquisition. Expect Renew Life to contribute 2pts of Sales in FY17
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Advantaged Portfolio: #1 or #2 Market ShareCompete Well in Categories with Branded Players
Sales from select business units represent approx. 33% of portfolio
Source: $ Market Share IRI MULOP 52 weeks ending 05/14/17
Home Care Salad Dressing Cat Litter
Clorox 20%
P&G 15%
Reckitt 14%
#1
#2
#3
Hidden Valley 23%
Kraft 13%
Private Label 12%
#1
#2
#3
Nestle 36%
Clorox 23%
Church & Dwight 20%
#1
#2
#3
Advantaged Portfolio: #1 or #2 Market ShareCompete Well in Categories with Private Label
Sales from select business units represent approx. 35% of portfolio
Source: $ Market Share IRI MULOP 52 weeks ending 05/14/17
BleachCharcoal Trash Bags
*Glad >50% Share of
Premium Trash
Kingsford 74%
Private Label 17%
All Other 9%
#1
#2
#3
Clorox 60%
Private Label 35%
All Other 5%
#1
#2
#3
Private Label 45%
Glad* 30%
Reynolds 17%
#1
#2
#3
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Advantaged PortfolioSupported by Consumer Megatrends
Affordability
Health & Wellness Sustainability
Fragmentation
MEGA
TRENDS
Advantaged PortfolioDriving Significant Synergies
COMMON MEGA TRENDS
*As of June 30th, 2016, Clorox’s S&A/Sales was ~14% vs. peer average of 20% . This number does not include R&D or marketing expenses and excludes peers that do not disclose S&A separately fromSG&A in their reported financial statements (Kimberly-Clark, Reckitt-Benckiser). Peer group consists of CHD, CL, PG, NWL, CPB, GIS, HSY, K, KHC, DPS, KO, PEP, COTY, EL, KMB, RB-GB.
COMMON CORE CAPABILITIES
Brand Building
Customer Supply Chain
Big Share Brands ● Low SG&A* (% of Sales) ● Top-tier ROIC ● Strong Cash Flows
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2020 Strategy
Mission
StrategyStrategy
Objectives
• We make everyday life better, every day
• Maximize economic profit
• Big-share brands in midsized categories and countries
• Engage our people as business owners
• Increase brand investment behind superior value and more targeted
3D plans
• Keep the core healthy and grow into new categories and channels
• Reduce waste in work, products, and supply chain
53%
31% 26%
13%
11%9%
0%
20%
40%
60%
80%
Clorox Peers S&P 500
Share Price Appreciation Dividend Paid
66%
35%42%
2020 Strategy Produces Strong Shareholder Return
Peers consist of 13 companies: CPB, KMB, K, RB-GB, KO, GIS, NWL, EL, PEP, CHD, CL, PG and HSY
Total Shareholder Return3 Years Ending 3/31/2017
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Leadership and Resilience in Times of Strategic Change in CPG
Digital Revolution
Consumer Focus on Value
ChangingRetail
Landscape
InternationalMacro
Headwinds
Strong Progress Across Strategy Accelerators
New, Digital-Led Agencies Cutting Speed to Market by up to 50%
Investing in Growth Brands FY17 Record-High Engagement
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Focus on 3D Innovation
Broad-Based Approach to Innovation
Product & Marketing
Product Superiority
Cost-o-vation*
New Product
Platforms &
Adjacency Expansion
GROW MARKET SHARE
ACCELERATE GROWTHEXPAND MARGIN
KEEP THE CORE HEALTHY
*Cost-o-vation is a term used at Clorox that describes innovation that improves product performance at a reduced cost.
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FY16 Innovation:Investing Longer and Building on Momentum
Burt’s Bees Lipsticks
Fresh Step with Febreze
Hidden Valley with Greek Yogurt
Clorox Wipes with Micro-Scrubbers
Glad with Clorox Antimicrobial
Clorox Bleach CrystalsStephen Curry
PartnershipBrita Infinity “Connected”
Pitcher
Clorox Clothes(International)
Setting the Odor Control Gold Standard in Cat Litter
Source: IRI MULOP 52 weeks ending 5/14/17 $ Share
FYTD Sales
FYTD Share
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Continuing Cat Litter Innovation in FY17
Fresh Step with Febreze Hawaiian Aloha
Product Innovation Cost-o-vation
New Convenient Compact Packs
*8% Price
Premium
vs non-
scented
2017 Innovation:Broad-Based Across the Portfolio
Hidden Valley Simply RanchBrita StreamLong-Burning Charcoal
Glad Kitchen Prowith Leakguard Lip Balm with
Flavor CrystalsClorox HealthcareFuzionScentiva Cleaning Platform
Fresh Step with Febreze
Hawaiian Aloha
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Innovating to Improve the Cleaning Experience
“Cleaning is boring… unfulfilling…
And never ending “
Sensorial Efficacious
73% of consumers seek new
experiences
Clorox® ScentivaTM
= Cleaning Power + Scent Experience
Tuscan Lavender & Jasmine Hawaiian Sunshine
� Kills 99.9% of Bacteria & Viruses
� Cleans, Disinfects and Deodorizes
� Two experiential custom blended scents from top fragrance houses
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“I absolutely loved the
scent…a lot better than
that cleaning-type scent
of other products.”
Experiential Scent Without the Sacrifice
“After cleaning, the
scent lingers almost
like I have flowers in the
room.”
“I trust the Clorox
name and I would love
scents that aren't harsh
chemical smells.”
“The fact that it has
good fragrance but is
the Clorox product is a
plus.”
ScentivaTM resonates with both
scent and efficacy
Source for verbatims: SKU BASES CTU 2015
Clorox® ScentivaTM
= Cleaning Power + Scent Experience
Tuscan Lavender & Jasmine Hawaiian Sunshine
13 Week Sales
13 Week Share
Source: IRI MULOP 52 weeks ending 5/14/17 $ Share
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Focus on 3D Technology Transformation
Leading the Industry in Digital Consumer Engagement
Clorox now invests 45%
of our media in digital
45%
FY14 FY15 FY16 FY17 Proj
Source: Clorox Internal
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FY16 FY17 Proj
Winning with e-Commerce Across Portfolio
+30% Sales
vs YA
Source: Clorox Internal
• Increase brand investment behind
superior value and more targeted
3D plans
• Keep the core healthy and grow into
new categories and channels
2020 Strategy
e-Commerce Enabled Innovation
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Focus on Portfolio Momentum
RenewLife®: Strong Strategic Fit
Health & Wellness
US Centric Clear Plan for Value Creation
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RenewLife®: Strong First Year
• Integration is on track, ahead of valuation in year 1
• Distribution wins in Food, Drug and Mass
• New marketing campaign
Portfolio Segmentation
Sales Growth Potential
High
High
Fuel Growth
Low
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Focus on Increasing Household Penetration
New FacesNew Demographic or
Behavioral Group
New SpacesConsumes Product in a
New Way
New PlacesNew Channel or Location in Store
31%
80%
FY13 Q3 FY17
% Sales Growing/Stable HHPen 80%of portfolio has growing
or stable household
penetration
Source: IRI Panel Data, Total U.S. All Outlets, NBD Weighted.
Strategic Choices are Working
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91%
54%
98%
61%
Growth Brands Fuel Brands
Q3 FY16 Q3 FY17
Growing Household Penetration
Source: IRI Panel Data, Total U.S. All Outlets, NBD Weighted.
Above represents the sales contribution from brands that have expanding or stable household penetration
63%
65%
Q3 FY16 Q3 FY17
Household Penetration
+1.25M
Households
vs YA
Source: IRI Panel Data, Total U.S. All Outlets, NBD Weighted.
Clorox® Brand is Leading the Way
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Focus on Growth Culture
Strong Organizational Culture is a Solid Foundation
Strong Values People Centric Operational Excellence
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Winning the Right Way
#12
#12
Corporate Responsibility at Clorox
<A> Reviewed by Ernst & Young LLPFootnotes: http://annualreport.thecloroxcompany.com/_pdf/CLX-012_2016_Integrated_Report.pdf page 27
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Clorox Engagement Exceeds Global Benchmarks
<A> Reviewed by Ernst & Young LLPFootnotes: http://annualreport.thecloroxcompany.com/_pdf/CLX-012_2016_Integrated_Report.pdf page 26
88% in FY17
Key Messages
• We have confidence in our 2020 Strategy
• Focus on profitable growth continues to produce solid results
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Strong Shareholder Return
Peer includes 13 companies: CPB, KMB, K, RB-GB, KO, GIS, NWL, EL, PEP, CHD, CL, PG and HSY
Steve RobbChief Financial Officer
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Key Messages
• We have confidence in our 2020 Strategy
• Focus on profitable growth continues to produce solid results
Solid FY17 Sales Growth (through Q3)
0%
3%2%
4%
2%
5% 5%5%
FY 2014 FY 2015 FY 2016 FYTD 2017
As Reported Currency Neutral
Note: As Reported is GAAP Sales Growth vs YA. Currency Neutral represents GAAP Sales Growth net of Foreign Exchange . For Reconciliation see Slide 62
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FY17 OutlookBased on May 3rd Earnings Call
• Categories: ~ +1%
• Innovation: ~ +3pts
• Renew Life: ~ +2pts
• Mix/Other: ~ -1pt
• FX: ~ -1ptSales
+3% to +4%
EBIT Marginabout +25 bps
Diluted EPS$5.25 to $5.35(+7% to +9%)
• Gross Margin: Down modestly
• Selling & Admin: <14% of Sales
• Advertising & Sales Promotion: about 10% of Sales
• Tax rate: 32% to 33%
EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a GAAP measure), excluding interest income & interest expense. EBIT margin is a measure of EBIT as a percentage of sales.
Long-Term Growth Aspirations
~80% of Clorox Sales
+2-4% annual growth
1.5 - 3.0 pts
company growth
U.S. Domestic
~20% of Clorox Sales
+5-7% annual growth
1.0 - 1.5 pts
company growth
International
Annual EBIT Margin Improvement: +25 to +50 bps
Annual Free Cash Flow: 10% to 12% of Sales
= +3 to +5pts
company growth
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Focused on Long-Term Gross Margin Expansion
Focus on International Profitability
Margin Accretive Innovation & Pricing
StrongCost SavingsTrack Record
Cost Savings Continue to Deliver
0 bps
50 bps
100 bps
150 bps
200 bps
250 bps
FY13 FY14 FY15 FY16 FY17+
EBIT Margin Benefit from Cost Savings
+150bpsAnnual
Goal
EBIT (a non-GAAP measure) represents earnings from continuing operations before income taxes (a GAAP measure), excluding interest income & interest expense. EBIT margin is a measure of EBIT as a percentage of sales. See reconcilation on our website (https://investors.thecloroxcompany.com/investors/financial-information/quarterly-results/default.aspx) and on slide 66 and 67
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Opportunities Exist Within SG&A
14.0%
5%
15%
25%
35%
45%
KHC CHD KMB GIS CLX PG K HSY RB-GB NWL COTY CL KO DPS PEP EL
% o
f S
ale
s
Goal:
< 14% Sales
SG&A % of Sales as of Latest Fiscal Year EndCLX as of June 30, 2016
Top-Tier ROIC
Peer Average: 15%
Return on invested capital (ROIC), a non-GAAP measure, is calculated as earnings from continuing operations before income taxes and interest expense, computed on an after-tax basis as a percentage of average invested capital. Average invested capital represents a five quarter average of total assets less non-interest bearing liabilities. ROIC is a measure of how effectively the company allocates capital. Information on the Peer ROIC is based on publicly available fiscal-end data (FactSet) as of 6/30/2016. See Slide 70 and 71 for reconciliation.
29%
0%
10%
20%
30%
CLX KMB CL HSY EL RB-GB DPS CHD CPB GIS PEP PG KO K COTY KHC NWL
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$780 $786
$858
$768
$590$649
$733
$596
FY13 FY14 FY15 FY16 Goal
$M
Operating Cash Flow Free Cash Flow
Healthy Free Cash Flow
Free Cash Flow (a non-GAAP measure) represents Operating Cash Flow from Continuing Operations less Capital Expenditures. See reconcilation on our website (https://investors.thecloroxcompany.com/investors/financial-information/quarterly-results/default.aspx) and on slide 68
% of Sales11% 12% 13% 10%
10% - 12%
of Sales
Use of Cash Priorities
Business Growth(includes targeted M&A)
Support Dividend
Share RepurchasesDebt Leverage1
(Target: 2.0 – 2.5x)
Free
Cash
Flow
1. Debt Leverage = Gross Debt / EBITDA
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M&A Focus
• Areas with Tailwinds in Categories, Countries, and Channels
• Strong Fit with Clorox Strategy and Capabilities
• Brands with Good Market Positions
• Attractive Margins
• Balance Sheet Flexibility
� Gross Debt/EBITA as of 3/31/17 is 2.1x (low end of targeted range of 2.0x to 2.5x)
Please note that this slide refers to general goals for Clorox’s M&A focus – each element may not be relevant or applicable to each potential
M&A transaction.
Nearly $2B Returned to Shareholders in the Last 4 Years
FY16 DividendPayout
Ratio = 61%
$590 $649
$733
$596
$330
$532 $568 $442
FY13 FY14 FY15 FY16
$ M
Free Cash Flow Cash Returned to Shareholders
Free Cash Flow (a non-GAAP measure) represents Operating Cash Flow from Continuing Operations less Capital Expenditures. See reconcilation on our website (https://investors.thecloroxcompany.com/investors/financial-information/quarterly-results/default.aspx) and on slide 68
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Healthy Dividend Growth…Dividends Have Increased Each Year Since 1977
0%
1%
2%
3%
4%
COTY KO GIS PG K KMB PEP KHC CLX CPB DPS HSY CL RB-GB NWL EL CHD
2.4% Peer Average: 2.5%
Dividend Yield as of Mar 31, 2017+5%
Dividend Increase in
2017
Strong Shareholder Return
Peer includes 13 companies: CPB, KMB, K, RB-GB, KO, GIS, NWL, EL, PEP, CHD, CL, PG and HSY
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Areas We Are Watching
• Changing retail landscape
• Slowing international economies
• Commodity costs expected to continue to firm up
Long Term Investment Case Remains Solid
• Investing behind leading brands to grow categories and share
• Margin improvement opportunities continue to exist
• Healthy cash flow generation
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Key Messages
• We have confidence in our 2020 Strategy
• Focus on profitable growth continues to produce solid results
Appendix
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$ in B FY13 FY14 FY15 FY16
EBITDA $1.2 $1.1 $1.2 $1.2
Total Debt / EBITDA 2.1x 2.0x 1.8x 1.9x
EBITDA Interest Coverage 9.5x 11.3x 11.9x 14.0x
EBIT / Interest 8.0x 9.6x 10.2x 12.1x
Free Cash Flow / Debt 25% 28% 33% 26%
FCF after Dividends / Debt 10% 12% 16% 9%
FCF as % of sales 10% 12% 13% 10%
FCF after Dividends as % of Sales 4% 5% 6% 3%
Long Term Credit RatingsBBB+
/Baa1BBB+/Baa1 BBB+/Baa1 A- / Baa1
CP Ratings A-2/P-2 A-2/P-2 A-2/P-2 A-2/P-2
Key Credit Metrics
Note: EBIT, EBITDA, FCF are Non-GAAP measures with reconciliations available on slides 65-69
Currency Neutral Net Sales Reconciliation
Q2 FYTD
Fiscal
2017
Q2 FYTD
Fiscal
2016
FY
Fiscal
2016
FY
Fiscal
2015
FY
Fiscal
2014
Total Net Sales Growth – GAAP 4.2% 1.4% 1.9% 2.6% -0.3%
Less: Foreign exchange -1.9% -2.8% -2.7% -2.1% -2.0%
Currency-Neutral Net Sales Growth - Non-GAAP(1) 6.1% 4.2% 4.6% 4.7% 1.7%
(1) Currency-neutral net sales growth represents GAAP net sales growth excluding the impact of the change in foreign currency exchange rates, and is calculated by re-measuring the current period new sales using the comparable prior year’s exchange rates.
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Gross Margin Reconciliation
Reportable Segments (unaudited)
Dollars in Millions
(1) Percentages based on rounded numbers.
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EBIT and EBITDA (unaudited)
Dollars in Millions
Footnotes on Slide 67
EBIT and EBITDA (unaudited)
Dollars in Millions
Footnotes on Slide 67
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EBIT and EBITDA (unaudited)
Free Cash Flow (FCF) Reconciliation
Dollars in Millions
(1) In accordance with the SEC's Regulation G, this schedule provides the definition of certain non-GAAP measures and the reconciliation to the most closely related GAAP measure. Management uses free cash flow and free cash flow as a percent of sales to help assess the cash generation ability of the business and funds available for investing activities, such as acquisitions, investing in the business to drive growth, and financing activities, including debt payments, dividend payments and share repurchases. Free cash flow does not represent cash available only for discretionary expenditures, since the Company has mandatory debt service requirements and other contractual and non-discretionary expenditures. In addition, free cash flow may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded.
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Free Cash Flow (FCF) Reconciliation
Dollars in Millions
Note: In accordance with the SEC's Regulation G, this schedule provides the definition of certain non-GAAP measures and the reconciliation to the most closely related GAAP measure. Management uses free cash flow and free cash flow as a percent of sales to help assess the cash generation ability of the business and funds available for investing activities, such as acquisitions, investing in the business to drive growth, and financing activities, including debt payments, dividend payments and share repurchases. Free cash flow does not represent cash available only for discretionary expenditures, since the Company has mandatory debt service requirements and other contractual and non-discretionary expenditures. In addition, free cash flow may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded.
Return on Invested Capital (ROIC) ReconciliationDollars in millions and all calculations based on rounded numbers
FY16
$ 983
88
$ 1,071
$ (365)
$ 706
$ 2,457
29%Return on invested capital (1)
Earnings from continuing operations before income taxes
Earnings from continuing operations before income taxes
and interest expense
Average invested capital (3)
Income taxes on earnings from continuing operations before
income taxes and interest expense (2)
Interest expense
Adjusted after-tax profit
(1) In accordance with SEC's Regulation G, this schedule provides the definition of a non-GAAP measure and the reconciliation to the most closely related GAAP measure. Return on invested capital (ROIC), a non-GAAP measure, is calculated as earnings from continuing operations before income taxes and interest expense, computed on an after-tax basis as a percentage of average invested capital. Management believes ROIC provides additional information to investors about current trends in the business. ROIC is a measure of how effectively the company allocates capital.
(2) The tax rate applied is the effective tax rate on continuing operations, which was 34.1%.
(3) Average invested capital represents a five quarter average of total assets less non-interest bearing liabilities.
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Return on Invested Capital (ROIC) Reconciliation
(Amounts shown below are five quarter averages) FY16
Total assets 4,247$
Less: non-interest bearing liabilities (1,790)
Average invested capital 2,457$
Dollars in millions and all calculations based on rounded numbers